Roundtable recommendations are forthcoming
Feb. 15, 2007 -- In an effort to further protect Kansas’ most vulnerable consumers, Attorney General Paul Morrison supported two bills that regulate the payday and auto title loans industry. Morrison testified before the House Insurance and Financial Institutions Committee today.
“These protections are necessary to defend Kansas consumers against the overwhelming interest rates charged by payday loan companies,” Morrison said. “Some charge an APR of as much as 400%.”
House Bill 2244 restricts payday lenders from providing multiple loans to a borrower with two or more outstanding loans. In addition, the bill would establish a statewide database to monitor borrowers and to prevent the use of multiple lenders to avoid restrictions.
House Bill 2245 would re-define auto title loans as fixed-term loans, instead of open-ended credit products. This would make them subject to reasonable restrictions, including placing an APR cap on these loans at 36%, the same percentage cap recently implemented by Congress for military personnel.
Under HB 2245, lenders who seize a borrower’s vehicle for failure to repay a loan would be required to refund all proceeds from the sale that exceed the principle loan, plus interest and expenses due to the lender, within 30 days of the vehicle’s sale.
“Since taking office, I’ve seen how much of a threat auto title loan companies pose to vulnerable Kansans,” Morrison said. “These companies can seize expensive cars upon default of a relatively small loan. That’s just not a good way to do business.”
On Friday, February 9, Morrison convened a roundtable discussion of the payday loan and car title loan industry in order to decrease predatory lending. The recommendations of the roundtable will be revealed later in the form of an amendment to House Bill 2244.
“I am grateful to Holly Petraeus and members of the roundtable for thoroughly examining the effects this industry has on Kansans,” Morrison said. “I look forward to their recommendations and urge the legislature to increase these protections for Kansas consumers.”
Morrison also encourages the banking industry to fill the void left by payday loan regulations by offering alternative small, short-term loan products. Other states, such as North Carolina, have already done this. Morrison has also begun rebuilding the Consumer Protection Division to take a leadership role in educating consumers and raising awareness about predatory loans.
“The legislation proposed here today is only part of the solution. Banks and credit unions should be encouraged to offer small, short term loans with reasonable interest rates,” Morrison said. “We need to help Kansans borrow more responsibly.”